written by khatabook | November 14, 2022

How to Get Business Loans in Chennai - Eligibility & Application

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Table of Content


India has been home to diversified culture, ethnicity and invaluable heritage for decades. India’s flourishing economy has given India to reign as the world’s 5th largest economy. Being a land of opportunity, this decade indeed belongs to industries and businesses that would help its exponential growth. In recent years, the southern part of India, especially Chennai, has witnessed a drastic rise in demand for resources and support for all types- of small, medium and large businesses. Assessing finance through loans or equity certainly lessens your business ownership and involves a lot of time and hassle. So let us look at some of the facts about business loans in Chennai, Tamil Nadu.

Did you know? India's top auto clusters are located in Tamil Nadu, one of the top 10 global automobile hubs. The State is frequently referred to as the "Detroit of Asia" and the "Automobile Capital of India." It has more than 1300 factories connected to this industry, making it one of the top manufacturing hubs in the world.

Eligibility for a Business Loan in Chennai

Any person who is running a business with a decent amount of earnings can be qualified to get a business loan. However, banks have specific criteria and checklists as to how much loan should be given to whom. It can be based on various factors, such as 

  1. Business Structure (Sole Proprietorship, Partnership Firms, LLP, Companies etc.)
  2. Business Turnover (Sales or Gross Receipts)
  3. Profit of the business (Gross Profit, Profit after Tax)
  4. Cash Flow of the business
  5. Nature of the business

Based on business profit and cash flow generation, different banks decide different eligibility of the loan amount they can lend to businesses. Banks need to ensure that the company can repay the EMI of the loan with the help of earnings that a business makes.

Also Read: Cash Credit Loan - Eligibility, Interest Rate, Features & Benefits

Documents Required to Get  Loans for Businesses in Chennai

  1. ID Proof such as PAN card
  2. Address Proof such as a Voter ID Card, Ration Card, Passport or Driving License
  3. Latest audited Balance Sheet
  4. Latest Audited Profit and Loss Statement
  5. Latest Audited Cash Flow Statement
  6. Latest Audited Statement of changes in Equity, along with Notes to Accounts
  7. Bank Statement for the last six months
  8. Board Minutes & Board resolution (In case of companies)
  9. Income Tax Return for the last two years
  10. Statement of computation of Income for the last two years
  11. Latest Income Tax Return for Co- Applicants for the last two years
  12. Ownership proof of Residence/ Office
  13. PAN Card
  14. Trade license 
  15. Memorandum of Articles, Association of Articles, Sole Proprietorship Declaration, Certified copy of partnership Deed 

The list is incomplete. Ultimately it depends on your Financial Profile, Risk Assessment of the Individual Banks, Loan Requirements and Terms and Conditions prescribed by the Bank.

Also Read: Learn about Short Term Loans - Short Term Loan Period, Advances & Types

How to Apply for a Business Loan?

Let us know look at the way to apply for a business loan. A few steps need to be followed.

1. Learn About Different Types of Loans and Their Application Mediums.

There are various types of loans, such as working capital loans, MSME loans, etc. The nature of the loans varies according to the business and banking regulations. So first, decide which kind of loan you want to avail yourself of for which sector of your business. This is a significant and crucial first step.

2. Start Preparing All the Essential Documents.

A financial institution’s primary job is to lend secured and unsecured loans to its borrowers. Now they do not know if that borrower can be trustworthy or not. What if he defaults on a loan and the bank’s name gets involved in a scam? That will be a substantial financial loss for the bank itself.  Hence, to secure themselves from all kinds of peril, documentation is a huge thing for a bank, and it has increased even more after the infamous scams that have taken place over some years. Above listed are several KYC documents a customer needs to keep handy before asking for a business loan.

3. Always Use a Business Loan Calculator.

Another easy way of getting approval is to fill out the exact amount of loan one can afford to borrow. Several lenders today host online EMI Calculators free of charge, and you can use one to understand and estimate the EMI amount you need to repay. 

4. Practice Caution for Certain Factors Like Your Cibil Score, Business Plan Etc.

Your CIBIL Score, business plan, and type of loan can help you get the loan early. So make them better.

5. Consult with the lenders for a speedy disbursal of the loan. 

You can consult with the lending institutions if there is an online method of payment or approval process if there is a paperless system available. Do your market research before approval. Keep your financials updated and ready.

Also Read: Top Business Loans for Women in India - A List of Small Business Loans for Women

Banks That Provide Business Loans in Tamil Nadu

Various banks issue loans for businesses in Chennai. They are:

  1. HDFC Bank
  2. ING Vysya Bank
  3. ICICI Bank
  4. Standard Chartered Bank
  5. Fullerton India
  6. Manappuram Finance Limited  

Tamil Nadu Government  Loan Schemes for Small Businesses

The Tamil Nadu Government has introduced various schemes for small business houses over the previous years.

1. Tamil Nadu Industrial Investment Corporation Scheme Limited- (TIIC)

2. Unemployed Youth Employment Generation Program- (UYEGP)

3. Micro Small & Medium Enterprises, Tamil Nadu- (MSME, Tamil Nadu)

4. New Entrepreneur Cum Enterprise Development Schemes- (NEEDS)

5. Tamil Nadu Adi Dravidar Housing Development Corporation Schemes implemented for Scheduled Caste- (TADHCO)

6. Department of Backward Classes and Most Backward Classes and Minorities Welfare- (TABCEDCO)

7. Tamil Nadu Industrial Cooperative Bank Schemes- (TAICO)

Also Read: What is Working Capital Loan? Meaning, Types, Advantages, Examples

Conclusion

Financial institutions provide several types of business loans to other business establishments so they can continue expanding. The advantage of those loans is that as they grow more adaptable, a wider part of the population can apply for loans. It will be accessible to more than just large corporations or medium-sized organisations. Even owners of small businesses can carry on with their everyday operations without stressing over their working capital and cash flow. Many businesses have seasonal business cycles, and they need on funding to grow and establish their operations without facing financial hardship.

Follow Khatabook for the latest updates, new blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, Income Tax, GST, Salary and Accounting.

FAQs

Q: What happens if I miss an ECS Bounce or an EMI Payment?

Ans:

The bank generally levies certain charges as a penalty or interest. Also, it gets added to your credit report. Depending on the severity and regularity of the bounce, it might affect your future chances of availing of a home loan or even a car loan. Banks can also take legal action against the borrower.

Q: Is a credit score required for a business loan?

Ans:

One of the essential factors before issuing a business loan is the customer's credit history. A minimum CIBIL score of 650 points and above is considered good before a business loan.

Q: What is collateral in a business loan?

Ans:

It is a security that needs to be pledged with the bank to avail of the loan facility. The more the loan's value is, the more significant benefits reap. Banks give higher loan amounts as they consider the low collateral risk. If any borrower can’t repay the loan, the bank can sell that collateral and recover their money.

Q: What are the ways of repaying the loan?

Ans:

Business loans can be repaid via Electronic Clearing System or Post Dated Cheques.

Q: How long does it take to disburse a business loan?

Ans:

The application, submission, approval and disbursal process of a loan takes a minimum of 3 to 10 business days. Again, it depends on bank to bank and other financial institutions as the process differs with every organisation.

Q: Is part payment allowed in the case of business loans?

Ans:

Some banks allow part payments. However, it all depends on the bank and varies from one bank to another. So it is better to ask the loan officer or advisor before taking a loan and get clarification before you sign the loan documents.

Q: What is the minimum and maximum amount of loan that can be granted?

Ans:

The Minimum amount is ₹1 lakh. At the same time, the maximum can be ₹30 lakh. Any amount above this shall be granted post discussion with banks and fulfilling their T&C (Terms and Conditions).

Q: How to start doing business in Chennai or Tamil Nadu?

Ans:

You must take a GST (Goods & Service Tax) Registration to register a business in Tamil Nadu or Chennai. After that, you can start your business.

Q: Which business is best in Chennai?

Ans:

Being a tourist attraction place, tours and travel can be considered to be a profitable business arena. Also, Chennai is a place for different types of cloth, from silk to cotton, to various designs and fabrics. So, you can also think of starting a garment or a clothing shop.

Q: What are some business ideas that can be started in Chennai?

Ans:

Clothing, Food Business, IT services, Digital marketing, Consulting, Coaching etc., are some of the excellent business ventures.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.